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Journal of Business and Economics, ISSN 2155-7950, USA

September 2015, Volume 6, No. 9, pp. 1613-1620


DOI: 10.15341/jbe(2155-7950)/09.06.2015/007
Academic Star Publishing Company, 2015
http://www.academicstar.us

Building Employees Engagement through Leadership, Human Resources

Management Practices and Organizational Culture

Anik Herminingsih
(Mercu Buana University, Jakarta, Indonesia)

Abstract: Competition in the business world is getting tougher. This circumstance requires employees who
have good engagement because employees having good engagement will have high morale, spread positive
information about the organization for which they work, and always strive to provide the best for the organization.
Leadership and human resource management practices within an organization shape employees perceptions,
attitudes, and behavior. Similarly, the organizational culture, shared values, governs the behavior patterns of the
organizations members. This research aims to develop a development model of employees engagement through
leadership and human resource management practices through organizational culture that supports employees
engagement. The data were collected by using questionnaires involving 111 students working in companies in the
Jakarta, Bogor, Tangerang and Bekasi (Jabodetabek) as research respondents. The data were analyzed by using
structural equation modeling (SEM) with AMOS program. The results showed that leadership and human resource
management practices have a significant positive effect on employee engagement through organizational culture.
Human resource management practices directly influence employees engagement, but the leadership has no
significant direct effect on employees engagement.
Key words: organizational culture; morale; employees behavior
JEL codes: L2

1. Introduction

The concept of employees engagement has gained popularity for the last twenty years. Research findings in
many organizations suggest that organizations put the development of engagement in the workplace as a priority.
For example, Mandiri Bank declared that its human resource management strategy is that employees high
engagement can be achieved. The reason is that with the high engagement, companies can lower employees costs
and employees can perform better. Wright et al. (1994) look at the practice of human resource management as a
means of forming perceptions, attitudes, and behaviors of employees. Facing increasingly intense competition,
especially in education industries will require leadership and human resource management practices that result in
the employees engagement through organizational culture. It is important to realize that in tight competition
management, managers may apply low cost policies or strategies which can result in counterproductive. Tight
budget policies (low-cost) will result in the dis-engagement of employees which cannot support the

Anik Herminingsih, Ph.D., Mercu Buana University; research areas/interests: human resource management. E-mail:
anik_herminingsih@mercubuana.ac.id and aherminingsih@gmail.com.

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Building Employees Engagement through Leadership, Human Resources Management Practices and Organizational Culture

competitiveness of universities (Mello, 2011). In tight business competition, an organization that can provide
excellent quality of service will have the ability to win the competition. Better quality of service can only be
performed by employees who have a high level of engagement, so it is necessary to study the factors that support
employees engagement.
The study aimed to investigate: (1) The effect of leadership on human resource practices. (2) The effect of
leadership on organizational culture. (3) The effect of human resource management practices on organizational
culture. (4) The influence of organizational culture on employees engagement. (5) The effect of leadership on
employees engagement. (6) The effect of human resource management practices on employees engagement.

2. Hypotheses

One factor of employees engagement is human resource management practices. Muilenburg-Trevino (2009)
defines engagement as statements regarding to positive works, marked by a spirit (vigor), dedication and
absorption. Individuals having engagement feel energetic in carrying out their work, attached to their work, and
are better to handle the demands of the job. The existence of high morale is characterized by high energy, mental
endurance, the willingness to perform well, and the diligence in doing their work. Dedication is characterized by a
sense of the importance of their contribution to the company, the enthusiasm, inspiration, pride, and challenge.
Absorption is characterized by a feeling of fun when doing his job, feeling time flies and feeling reluctant to break
away from work.
Based on previous studies, for example by Wyatt (2009), organizations with employees having engagement
have retention, productivity, customer satisfaction, innovation, and higher quality. Employees with engagement
provide greater benefits but less costs. According to Wyatt (2009) engagement is a combination between
commitment and line of sight, in which the employees commitment is the motivation to support the success of the
organization. Line of sight is the focus and direction that enable employees to understand what must be done by
employees to make their organization successful.
Bailey (1993) states that human resource management practices can influence employees through their
influence on the ability and motivation of employees and through organizational structure which gives employees
the ability to control behavior and shows their role in the organization. Work environment designed to motivate
employees will encourage them to do better and will support to the success of the organization (Berg, 1999). Work
resources are related to process of motivation with individual and organizational results through employees
engagement (Schaufeli & Bakker, 2004). Based on these ideas, this research considers the practices of human
resource management as predictors of employees engagement. Researches on the relationship between human
resource management practices and employees engagement are still relatively few in Indonesia. Studies that
directly focus on the impact of human resources practices on employees engagement, among others, were
conducted by Asad et al. (2011) and by Sardar et al. (2011). Both studies were conducted to determine the impact
of human resource practices on employees engagement in the banking sector in Pakistan. The results of both
studies stated that there is a significant relationship between human resource practices and employees
engagement.
The practice of human resource management is a factor to create organizational culture. This is proven in
Singhs research (2010) that the practices of human resource management which consist of the process of
recruitment, training and employee development, performance appraisal, and compensation significantly influence

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Building Emp
ployees Engaggement through
h Leadership, Human Resou
urces Managem
ment Practices and Organiza
ational Culturee

organizationnal culture. Research by Kumari


K (2012)) also provedd that human resource
r mannagement is a major factorr
to shape orgganizational cuulture, and thhen affect the effectivenesss of organizattions.
The coorrelation betw ween employyees engagem ment and orgganizational culture
c can bbe explained by using thee
Social Exchhange Theoryy. As it is knoown, the engagement of employees
e annd their organnization are the
t results off
2-way interaaction betweeen the emplooyees and thee organization ns (Robbinsoon et al., 20044). Organizattional culturee
has a conceppt of exchangge, where thee implementattion of good values and management
m ssystem can bee assumed ass
an endorsem ment of the orrganization too its employeees. Good org ganizational culture can bbring psychollogically safee
feelings to the employeees themselvves. Researchh conducted by Kahn (11990) found that there is i a positivee
correlation between
b empployees safee feeling andd employees engagementt. Siddhanta et al. (2010 0) stated thatt
organizationnal culture pllays a role inn the existennce of emplo oyees engageement as orgganizational culture
c is thee
bridge betweeen the organnizations and their members.
Denison (2010) in hish study of a sample of 9,464 individu uals in 90 orgaanizations in North Ameriica found outt
that employee engagemeent is a result of a healthyy organization nal culture. According
A to hhim, if organ
nizations lookk
at employeee engagementt alone, withhout considerring the cultu ure that emplloyees work in, they poteentially leavee
themselves blind
b to the strategic
s strenngths and weaknesses in thet organizatiion that impaact employee performancee
and ultimateely organizatiional performmance.

Figure 1 Research Frramework

2.1 Stu
udy Hypothesis
Based on
o the theoryy and previouus researchess, the researchh model of employees
e enngagement iss proposed ass
the Figure 1. The hypotheeses are as foollows:
H1: Leadership signnificantly influences the huuman resourcce management practices.
H2: Leadership signnificantly influences the orrganizational culture.
H3: Huuman resourcee managemennt practices siignificantly innfluence the organizationaal culture.
H4: Orgganizational cultures signiificantly influuence employ
yees engagem
ment.
H5: Leadership signnificantly influences emplooyees engageement.
H6: Huuman resourcee managemennt practices siignificantly innfluence empployees engaagement.

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Building Employees Engagement through Leadership, Human Resources Management Practices and Organizational Culture

3. Methods

3.1 Operational Research Variables


This research is an explanatory research as it aims is to explain the influence of variables through hypothesis
testing. This research is related to human behavior and this study is an explanatory research from the perception of
the respondents (explanatory perceptional research).
The variables used in this study consist of four variables: leadership (X1) and human resource management
practices (X2) as an exogenous variable, and employees engagement (Y2) as endogenous variables, and
organizational culture variables (Y1) serve as an intervening variable.
Variable of leadership (X2) is the respondents perception of their immediate leaders in their work. This
variable is measured using a Likert scale on the five dimensions of Poshner leadership model, consisting of (1)
Model the way, (2) Inspire a shared vision, (3) Challenge the process, (4) Enable others to act, and (5) Encourage
the heart.
Variables of human resource management practices (X2) are the employees perception of the
implementation of the operational functions of human resource management. This variable is measured using a
Likert scale on the following dimensions (Rathnaweera, 2010), consisting of (1) Employee Recruitment and
Selection, (2) Employee Training and Development, (3) Performance Evaluation, (4) Promotion, and (5)
compensation for Employees.
Organizational culture variables (Y1) are the employee perceptions of the practices and traditions done in the
company. This variable were measured using a Likert scale (1 to 5 points) using the four dimensions of Denison in
Fey and Denison (2008), namely (1) engagement, (2) consistency, (3) Adaptability, and (4) Mission.
Employees engagement variables (Y2) are the perception of the employees about the feelings of
commitment, pride and willingness to strive hard in doing his job. This variable was measured using a Likert scale
(1 to 5 points) by using three dimensions of Schaufeli et al. (2009) namely: (1) Vigor, (2) Dedication, and (3)
Absorption.
3.2 Samples and Data Analysis
The populations of this study are employees in Jabodetabek who are still studying in the University of Mercu
Buana, the sampling is convenience sampling as many as 111 people. Primary data were collected with
questionnaires submitted directly to the respondents by enumerator who will explain how to fill out the
questionnaires. The data were processed using structural equation (SEM) using AMOS program package
(Analysis of Moment Structure) version 16.

4. Results and Discussion

4.1 Descriptive Statistics


Statistics respondents responses to the questions in the research questionnaires showed scores of indicator of
the research variables, presented in Table 1. It shows that the leadership dimensions have the lowest scores on the
challenging dimensions of 3.5813 and the highest scores on the inspired dimensions by 3.7863. It means that the
average of respondents answers between neutral and agree. Of indicators of human resource management
practices, only the process of recruitment and employee selection and training and employees development
scored above 4, which means that respondents agree. The transparent assessment, fair promotion and

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Building Employees Engagement through Leadership, Human Resources Management Practices and Organizational Culture

compensation system shows scores below 4, meaning that most of the respondents answered neutral.

Table 1 Mean Score, Loading Factor and Construct Reliability


Variable/Indicator Mean Score Loading Factor ConstructReliability
Leadership
1. Model the way 3.6640 0.644
2. Inspire a shared vision 3.7863 0.822
3. Challenge the process 3.5813 0.783
4. Enable others to act 3.7280 0.724
5. Encourage the heart 3.6549 0.831 0.904
Human Resource Management Practices
1. Recruitment and selection 4.0105 0.637
2. Training and development 3.7869 0.568
3. Performance evaluation 3.7866 0.952
4. Promotion 3.4365 0.578
5. Compensation 3.3267 0.670 0.882
Organizational Culture
1. Involvement 3.7536 0.679
2. Consistency 3.6168 0.835
3. Adaptability 3.7360 0.763
4. Mission 3.7964 0.727 0.914
Employee Engagement
1. Vigor 3.8166 0.580
2. Dedication 3.8429 0.967
3. Absorbtion 3.3911 0.576 0.934

Based on the statistics of respondents responses, that the indicators of organizational culture has a value
below 4, it means that most respondents answered neutral and do not agree to these questions about the
organizations culture. These values indicate that the perception of the respondents still can be improved to obtain
the expected results. Similarly engagement indicators have an average value of less than 4; it means that the
majority of respondents have not agreed on the questions in the questionnaire. Score of 4 means that the
participants agree; it means that they have engaged to the company where they work; it means that most
employees do not have engagement so that it can still be improved.
4.2 Confirmatory Factor Analysis
The results of confirmatory analysis for the measurement of the research variables are based on the value of P
values; all indicate the significance value below 0.05. The results of the parameter estimates (standardized
estimates) as in Table 1 shows that the value of the loading factor of all indicator variables of the research is
greater than 0.5; it means that it is valid for measuring the research variables. The reliability of measuring
instruments based on the value of variant extract, all have a value greater than 0.5, while values of construct
reliability above 0.7. This means that the research measuring instruments qualify reliability.
4.3 Normality Assumptions
The further testing data is to analyze the level of normality of the data used in this research. Assumption of
normality of the data must be met before they can be further processed for SEM modeling. The test results are
some of the CR values of skewness of greater than 2, but the CR of its kurtosis is less than 2, so the presence of
skewness is still acceptable. There is only one variable that has a CR value of skewness and kurtosis CR greater

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Building Employees Engagement through Leadership, Human Resources Management Practices and Organizational Culture

than 2, but it still can be retained in the model due to the strong supporting theory and it is based on the valid and
reliable confirmatory factor.
Testing for the presence of outliers is done based on the Mahalanobis index value. Testing for the presence of
outliers or not is based on the Mahalanobis index using criteria on the value of p1 (Singgih, 2002, p. 87). P1
values smaller than 0.001 (indicating that the data are outliers). Based on these criteria there are no outliers so that
the data meet the assumptions of normality or acceptable.
4.4 Goodness of Fit Model Test
Value CMIN/DF is 1.610 (less than 2), indicating that the model research is good. RMSEA value of 0.079
indicates that the model is good and it can be used for analysis. The value of CFI in this research is 0.935. Various
considerations above indicate that the model is acceptable for further analysis.
4.5 Structural Equation Analysis
The result summary of the testing hypotheses about the effects of human resource management practices and
organizational culture on employees engagement is presented in Table 3. Criteria used for testing are based on the
criterion P value, cut-off value of CR with a significance of 0.05.

Table 2 Hypotheses Test Result


Std.Estimate Estimate C.R. P
HRM Practices <--- Leadership 0.495 0.480 3.760 ***
Organizational Culture <--- Leadership 0.503 0.456 4.082 ***
Organizational Culture <--- HRM Practices 0.356 0.333 3.051 0.002
Engagement <--- Organizational Culture 0.332 0.243 2.386 0.017
Engagement <--- Leadership 0.174 0.116 1.467 0.142
Engagement <--- HRM Practices 0.276 0.189 2.381 0.017

4.6 Hypothesis 1
The testing results of the effect of leadership on human resource management practices indicate the P value
of 0.000; it means that the hypothesis is accepted. This result supported Yukl (2006, p. 4), which defines
leadership as influence processes, which affect the interpretation of events for followers, the choice of targets for
the group or organization, the organization strategies to achieve these objectives. As strategic function of human
resource management practices, the human resource management practices could be used by the leaders to
achieve the goals or targets. To promote employees performance, for example, the leader can implement the
performance based compensation.
4.7 Hypothesis 2
The testing result of hypothesis the influence of leadership on organizational culture indicates a P value of
0.000; it means that the hypothesis is accepted. The results of this study prove that an effective organizational
culture, which consists of the dimensions of involvement, consistency, adaptability and mission, can be created by
the leadership which has the dimensions of model the way, inspiring, challenge the process, and encouraging
subordinates. The most powerful dimension is encouraging, followed by inspiring dimensions.
The results of this research support previous thinking and researches. As stated by Daft (2002, p. 300) that
leadership is a relationship builder and as a values builder within the organization. A leader has the role motivating
and empowering others through communication skill and power. As the values builder within the organization,
leaders create a vision and define strategic direction and forming the culture.

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Building Employees Engagement through Leadership, Human Resources Management Practices and Organizational Culture

4.8 Hypothesis 3
The results of testing the hypothesis that human resource management practices significantly influence the
organizational culture is accepted, since the P value of 0.000. The results of this research support the previous
research conducted by Singh (2010) that the practice of human resource management consisting of the process of
recruitment, training and employee development, performance appraisal, compensation have significant effects on
all dimensions of organizational culture. This research also supports the research by Kumari (2012) which proved
that human resource management is the main factor for shaping organizational culture, and has significant effect
on organizational effectiveness.
4.9 Hypothesis 4
The testing result of the hypothesis that organizational culture significantly influences employees
engagement is proven, since the P value of 0.05. It is indicates that organizational culture significantly influence
employees engagement. Siddhanta et al. (2010) stated that organizational culture plays a role in the creation of
employees engagement as organizational culture is the bridge between the organization and its members. This
research also supports the results of previous studies by Suharti and Suliyanto (2012) which proved that leadership
and organizational culture affect the employees engagement. Organizational cultures are the values, beliefs,
habits and assumptions that exist in the organization. It can also be regarded as a pattern of behavior, rules and
traditions or customs in the organization. Organizational culture which has a positive influence on employees
engagement is a healthy organizational culture, as expressed by Denison (Denison Consulting, 2010) including
four dimensions namely engagement, empowerment, adaptability and mission.
4.10 Hypothesis 5
The testing results of the hypothesis that the leadership significantly affect the employees engagement shows
the P value of 0.143, greater than 0.05. It is indicated that the direct influence of leadership on employees
engagement is not significant although it showed a positive effect. This result support the previous research by
Alimangkutana (2014) and Supriyono (2014) conducted in Indonesian context. Both of them found that leadership
affected employees performance through organizational culture and employees satisfaction. It also supported
what Yukl (2006) stated, that leadership affected the followers directly and indirectly.
4.11 Hypothesis 6
The hypothesis is that human resource management practices significantly influence employees engagement.
Table 2 shows the value of the P value of 0.017. It means that the hypothesis is supported by the results of the
research, that the practices of human resource management significantly influence employees engagement. The
results of this study support the results of previous studies conducted by Asad et al. (2011) and by Sardar et al.
(2011). Both studies were conducted to determine the impact of human resources practices on employees
engagement. Both studies showed similar results, namely that there is a significant relationship between human
resource practices and the employees engagement.

5. Conclusion

The perception of employees on leadership and human resource management practices in average is pretty
good, so is in the organizational culture. Most of the employees have a pretty good engagement; it means that
good leadership, human resource management practices, organizational culture, and employees engagement can
still be improved.

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Building Employees Engagement through Leadership, Human Resources Management Practices and Organizational Culture

Leadership directly affects positively and significantly to human resource management practices and
organizational culture. Human resource management practices have a significant and positive effect on the
organizational culture. Organizational culture and human resource management practices have a direct influence
positively and significantly on employees engagement. Leadership does not have a significantly direct effect on
employees engagement.
Thus leadership makes an important effect on employees engagement, since it affects human resource
management practices, and together with human resource management practices have a significant positive effect
on employees engagement through organizational culture, although the leadership has no significant direct effect
on employees engagement.

6. Recommendation

Considering that employees engagement can be enhanced through leadership and good human resource
management practices, by creating an effective organizational culture, it is suggested that the managers implement
leadership dimensions proposed by Poshner called the leadership challenge. The leaders should implement such
behaviors, model the way, inspiring a shared vision, challenge the process, enable others to act, and especially
encourage the heart.

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